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In recent times, the Australian Taxation Office (ATO) has been sending shockwaves through the taxpayer community by alerting individuals and their tax agents to unpaid historical tax obligations. This unexpected notice confused many people who were previously unaware of the existence of these debts. In this article, we will focus on the latest developments in historical tax debt, the ATO’s approach, and the basic steps taxpayers take in managing their obligations.

Understanding the Situation

The ATO possesses the authority to waive debts only under specific circumstances, such as severe financial hardship. Occasionally, ATO may choose to place a debt “on hold” if it is not economical to do so. In such scenarios, the debt is temporarily suspended, not cancelled, meaning it could resurface in the taxpayer’s account later, potentially being deducted from future refunds. Notably, the ATO paused this practice of offsetting debts during the COVID period, leaving these amounts untouched.

However, in 2023, the Australian National Audit Office highlighted that excluding debts from offsetting contradicts the law, regardless of the debt’s age. Consequently, the ATO initiated contact with taxpayers regarding the historical debts placed on hold, catching many off guard.

Unveiling Hidden Debts

Numerous taxpayers accumulated debt unknowingly, as these obligations remained labelled as “inactive” within the ATO’s systems. Although the ATO has assured that action on debts placed on hold before 2017 has been suspended while they reevaluate their approach, it’s vital to understand that this does not nullify the debt. The burden of unpaid tax obligations can have significant implications for individuals and businesses alike, making it imperative to address these issues promptly and effectively.

Impact on Small Businesses

Small businesses, which constitute two-thirds of the $50 billion collectible debt owed to the ATO, are particularly affected by these developments. With the ATO resuming its standard debt collection practices as of July 2023, including reporting debts exceeding $100,000 to credit bureaus, small business owners must remain vigilant. Proactive engagement with the ATO is crucial for businesses with outstanding tax debts to mitigate the risk of further escalation.

Managing Tax Obligations

For taxpayers struggling with unpaid historical tax debts, a strategic approach is needed to address the issue. Firstly, individuals and businesses should carefully assess their tax records to identify any outstanding debts. Seeking professional advice from a tax professional or accountant can provide valuable insight into the complexities of tax law and the ATO’s procedures. In addition, discussing payment plans or hardship clauses directly with the ATO can help reduce the burden of outstanding tax debts.

Should you please have any question in regards to above, please feel free to contact our friendly team in Pitt Martin Tax at 0292213345 or

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.  If expert assistance is required, professional advice should be obtained.

By Zoe Ma @ Pitt Martin Tax